Bulb takeover will only cost taxpayer £260m, says Octopus Energy
Octopus Energy’s takeover of Bulb could cost the taxpayer considerably less money than previously estimated, the firm told City A.M.
The Big Six Energy supplier’s chief financial officer Stuart Jackson said the takeover will come in at a net loss of £260m to the taxpayer.
This is considerably less than the £6.5bn calculated by the Office for Budget Responsibility and £2.5bn to £4bn estimates made by industry analysts and insiders over the past 12 months.
Jackson said: “Our numbers are based on forward prices, but our view is that the total cost of taking Bulb into government ownership and then selling it out will net out at around about £260m lost to the government. That is materially better than any of the numbers that have been bandied around previously.”
Octopus declined to detail the calculations, but the vast gulf between former estimates and its predictions reflect falling gas prices and the general uncertainty around the terms of the Bulb deal.
City PM understands Octopus is factoring in a £1.5bn cost from Bulb’s stint in administration, with the government set to make over £1.2bn from the sale.
This equates to a £260m difference, and includes a government windfall of £500m locked in via cheaper energy procurement for January and hedging arrangements.
The remainder of the £1.2bn estimates depends on wholesale prices remaining low as forecast through February and March, when energy is still being purchased on the spot market.
It is also widely recognised the costs of continuing to prop up Bulb in the spot market as a de-facto nationalised entity beyond last year’s bidding process could have exposed the taxpayer to hundreds of millions of pounds more in energy costs.
Bulb was the seventh largest supplier in the UK and home to 1.6m customers prior to its collapse in November 2021, when it fell into special administration.
Octopus snapped up the supplier in October last year, making it the UK’s third biggest energy firm with 4.9m customers.
City PM understands the takeover includes a hedging strategy, a nine figure lump sum to the government and a profit share deal.
The deal was confirmed in December following a legal challenge from Centrica, EON UK and Scottish Power.
The takeover is still subject to an ongoing judicial review from Centrica, which has raised concerns over the perceived lack of transparency in the deal.